Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.

-Refer to Table 16-4.What is this firm's profit maximizing level of output?

Question

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.What is this firm's profit maximizing level of output?

Quizplus · Accepted Answer

The profit maximizing level of output occurs where marginal revenue (MR) equals marginal cost (MC). In this case, at 2 units of output, MR = $40 and MC = $40, so the firm would maximize profits by producing 2 units of output. At this level of output, the firm would charge a price of $60, and earn a total profit of $40. Therefore, the best choice is C) 2 units of output.

Table 16-4 This Table Shows the Demand Schedule, Marginal Cost, and Average